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Finance and Growth : Empirical Evidence from Developing Countries, 1960-1990

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  • TRABELSI, Mohammed
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    Abstract

    This paper examines the empirical relationship between financial intermediation and economic growth using cross-country and panel data regressions for 69 developing countries for the 1960-1990 period. The main results are : (i) financial development is a significant determinant of economic growth, as it has been shown in cross-sectional regressions; (ii) financial markets cease to exert any effect on real activity when the temporal dimension is introduced in the regressions. The paradox may be explained, in the case of developing countries, by the lack of an entrepreneurial private sector capable to transform the available funds into profitable projects; (iii) the effect of financial development on economic growth is channeled mainly through an increase in investment efficiency.

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    File URL: http://hdl.handle.net/1866/381
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    Bibliographic Info

    Paper provided by Universite de Montreal, Departement de sciences economiques in its series Cahiers de recherche with number 2002-13.

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    Length: 29 pages
    Date of creation: 2002
    Date of revision:
    Handle: RePEc:mtl:montde:2002-13

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    Keywords: financial intermediation; economic growth; cross-section; nel data;

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